Dan Fumano: If foreign home ownership is a $45-billion 'tip of the iceberg,' Vancouver expert hopes 'we're not on the Titanic'

If $45 billion in foreign-owned Metro Vancouver housing represents the “tip of the iceberg” — to use the recent words of one federal official — then Andy Yan is a bit worried about what’s under the water.

Yan, director of Simon Fraser University’s City Program, spent the past three weeks “drilling deep” into gigabytes of raw data on Vancouver property ownership, released last month by Statistics Canada.

Yan’s analysis shows that the kinds of condominiums sought by and sized for Vancouver families hoping to live in the city where they work also appear especially desirable to people in other countries who want to put their money in those condos, but not their families.

While some real estate industry figures maintain that local demand drives Metro Vancouver’s housing market, where prices across the region increased 65 per cent in the last three years, other experts say the new figures reveal a level of foreign ownership high enough to put substantial pressure on pricing.

It’s unclear how many properties fit those descriptions, but, said McCarrell: “You’re seeing the tip of the iceberg right now, quite frankly.”

To which Yan responds: “If that’s the tip of the iceberg, I just hope we’re not on the Titanic.”

Yan’s analysis shows while the rate of foreign property ownership is as low as one per cent in some segments of the Metro Vancouver housing market, it’s above 20 per cent in others.

Yan found that of all City of Vancouver condos worth $1.5 million or more, regardless of when they were built, at least one in five were owned by foreigners (people whose primary residence is outside of Canada, regardless of immigration status or citizenship). Richmond and Coquitlam had similar rates. This isn’t a tiny number of “luxury” units in Vancouver. The median price of a three-bedroom condo, considered a suitable housing type for a local working family, was $1.62 million last month, according to the Real Estate Board of Greater Vancouver.

A 20 per cent proportion of foreigners owning higher-value condos is “a very high number” by international standards, and enough to “drive up housing prices for local residents,” said Manuel B. Aalbers, an associate professor of urban and economic geography at the University of Leuven in Belgium.

“There are very few, if any, other cities where the numbers are this high,” said Aalbers after reviewing Yan’s findings. Aalbers studied transnational property investment in six countries for his 2016 book The Financialization of Housing.

“Even a much smaller number — say five per cent — would already impact housing prices significantly,” Aalbers said.

The numbers suggest Vancouver, like other global cities including London and New York, is being used “as a safe-deposit box” by a wealthy international crowd using “Vancouver as a place to store their money.”

But Reliance Properties president Jon Stovell said even if the rate of foreign ownership is 10 to 30 per cent, “we’re still talking about somewhere between 70 and 90 per cent who aren’t foreign. So why are those people having so much trouble buying?”

“Foreign ownership is a factor; I don’t think anybody’s saying it’s not a factor,” Stovell said.

Governments have tried several measures to address demand — including B.C.’s foreign buyer tax and Vancouver’s empty homes tax — with only “limited effect,” he said.

Stovell said Vancouver’s focus should be increasing housing supply, which has been restrained by restrictive zoning and permitting delays.

Vancouver’s emergence as a “very desirable world-class” city has also been a factor in housing prices, said Urban Development Institute CEO Anne McMullin.

“The origins of the escalation in home prices and foreign interest in both buying here to live and invest goes back decades to when Vancouver invited the world for Expo 86 and the Winter Olympics 2010,” McMullin said. “Additionally, we have a heavily constrained land base in the Lower Mainland and haven’t built enough homes to both meet our population growth and strong local demand.”

But population growth and local demand alone, strong as they may be, don’t fully explain the radical disconnect that’s emerged between Vancouver housing prices and local incomes.

Detached houses in Vancouver owned by non-residents of Canada are worth 45 per cent more, on average, than Vancouver houses owned by people who live in this country.

Yan found at least $45 billion worth of residential Metro Vancouver property is owned by non-residents, including $22 billion worth in the City of Vancouver alone.

The real number is higher, as StatsCan acknowledged, but no one knows how much higher.

“If we’re steering the Titanic, we don’t need to know exactly how big that iceberg is,” Yan said. “We know it’s there. And we need to perhaps alter course, because it takes time for the entire system to shift.”

But as for how exactly to alter course, the debate continues full steam ahead.

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